Manas Enters Agreement, Begins Tajik Exploration Program

DWM Petroleum, a subsidiary of Manas, and Santos International Ventures have entered into an agreement under which Santos has a unilateral option to elect for the parties to execute at a later stage a farm-in agreement for a 70% interest in DWM's Novobod Tajikistan license and a proposed North Tajik license.

Manas expects the North Tajik License to be granted to Somon in the near future.

DWM has a 90% equity interest in Somon with the other 10% interest held by the local Tajik company Anawak LLC. Under the Option Agreement Santos will pay an amount equivalent to the seismic acquisition costs in the Tajik area (approximately U.S. $1.3 million) in consideration for a call option to farm in to Somon's prospecting licenses. The option may be exercised by Santos any time during the option period. The option period commences on the date of the option agreement and expires after six months unless extended due to certain conditions not being met.

In connection with the option agreement, DWM subsidiary Somon has entered into a seismic agreement with Saratovneftegeofizika (SNG) under which SNG is to carry out approximately 110 kilometers of 2D seismic acquisition in Tajikistan. The seismic agreement underlies the option agreement and is designed to meet a condition set by the Tajik authorities, whereby once work has commenced in the Novobod license, an additional license area, the North Tajik license, may be granted to Somon Oil.

In the event that Santos elects to exercise its option, Somon, DWM and Santos will execute the farm-in Agreement under which future funding obligations are set out over three phases. Santos obligations will include costs associated with the acquisition of additional 2D seismic (Phase 1), the drilling of a number of exploration wells (Phase 2) and further appraisal drilling (Phase 3). Santos may elect to withdraw at the completion of Phase 2.

Because of commercial reasons, the parties have agreed not to disclose the total funding obligations until a later stage.

A South Petroleum Company (SPC) operated seismic program is currently underway on the South Tuzluk Petroleum Licence in Kyrgyzstan (SPC is 70% owned by Santos, 25% DWM and 5% Kyrgyzneftegaz) and as a consequence of the completion of the option agreement, this survey will be extended into DWM's Tajik Novobod license area, with Tajik data acquisition expected to commence within the next month.

The Novobod license is located in the Fergana basin directly north of the South Tuzluk license. SPC is currently shooting seismic for better definition of subthrust leads previously defined by Soviet 2D seismic within the South Tuzluk license. The Novobod license shares the same geology as the Tuzluk license in Kyrgyzstan. An existing oil and gas field extends across the border from the Tuzluk license into the Novobod license area and a number of leads may also straddle the adjoining license areas.

The United States Department of Energy estimates 3 billion barrels of recoverable oil remained still undiscovered in the Fergana basin.